Agile Businesses Win the Race

I would argue that there are three absolute truths that we can rely on as entrepreneurs and business owners. This is an appealing proposition because absolute truths allow us to plan and act with certainty.

The first is that your physical body will die. Given this truth, plan for it now and build your business into an asset of value so that at the appropriate point in time you can sell it, earn a capital profit and retire gracefully and in comfort.

If you aren’t building your business into an asset, you had better love what you do, since it’s likely you’ll have to do it for a very long time to earn your income!

Next, you can’t change another person. I’m not saying you can’t try by way of argument, influence, threat, persuasion and other means. The point is that you can’t change another person. Only they can change themselves. This is a useful consideration when employing someone or selecting a partner in business.

Finally, we live in a world of enormous uncertainty. Nothing is predictable. This is the toughest of all the truths to deal with, since it provides the greatest threat and opportunity to our businesses and is the subject of this article. The best way to manage this is to build an agile business able to deal with what comes across your path.

Could this be you?

Allan is a technically smart guy. In every conversation with him, lights switch on and he can’t see any unsolvable issues within the lighting business. He has ridden and driven trends in light design and his expertise is uncontested.

Allan had a lot to be proud of. His multi-channel strategy allowed him to capitalise on the many players, from architects to quantity surveyors, and large construction companies to the multitude of bakkie-builders.

A constant flow of orders had allowed him to build his business to a 68-staffed organisation.

Ongoing sales were the oxygen of Allan’s business and inventory management was its food. When orders came in, Allan needed to make sure he had stock. Minimum stock levels were calculated and adjusted every year to ensure that this strategy remained relevant and in place.

The industry had been going through some tough times. Delays in government expenditure on capital projects, increasing lead times and reticence to invest had all impacted on the construction industry. Residential home improvements and DIY had increased slightly and Allan’s ability to see this had enabled him to respond and capitalise on the slowdown.

Recently, things had picked up. Solid medium-sized construction projects were being confirmed and he had to get his stock levels up again. All in all, it looked like this was going to be a great year.

In February last year, Allan arrived at work as he always does. It was almost 7.30am and he was prepared for all his internal Monday morning meetings to set up the week. The factory was already abuzz and he greeted his staff first thing as his morning routine determined. He had good relationships with every one of his staff and was well regarded by all.

At mid-morning, whilst running calculations on a new design that he had been working on, Allan heard the factory quieten down. It was sudden. Immediately he stood up and went down to the factory floor. Through the glass in the door he could see something was wrong.

As he entered the factory, he saw his staff had gathered by the dispatch doors. There were about 50 of them and someone was speaking to them. As he approached the crowd, the speaker left the factory through the dispatch doors and the staff members began to follow.

Allan called at them asking what was going on. He turned to his floor supervisor who simply shrugged his shoulders and moved away. Allan was witnessing an unprocedural strike and his factory floor ground to a halt. What made it worse is that staff members that Allan had known for some time were racheting up the aggression stakes.

After four months of aggressive dialogue, demands that had no commercial basis, legal bills that he never thought possible, the deepest overdraft he had ever faced, consistent production began again.

Unfortunately, orders had been lost, penalties for non-delivery had been paid, product quality had been compromised and worst of all, trust had been broken. The extent of the damage was profound.

Expect the unexpected

Many things drive predictable uncertainty in our lives as entrepreneurs. The pace and the extent of these drivers has been exacerbated in the last decade. Whilst times have always been uncertain, the rate of change is faster than ever and multi-dimensional.

Our best answer is to position ourselves for constant, unexpected, guaranteed change and the best way to do this is to create an agile business. One that can respond to the unexpected faster and more effectively than your competitors and big business.

Allan is not an unusual business owner. In speaking with him, he admitted that he had had an intuition that his staff was becoming increasingly agitated. He had suspected an outside influence was responsible.

He had chosen to ignore it in the hope that it would blow over since he had no answer to the problem. His business was driven by invested legacy systems, a way of working and deeply rooted relationships that relied on trust. Perhaps the only person not wanting change, this inevitable consequence of life, was Allan.

Here’s how he could have mitigated the risks of change:

Build your business on the back of systems, not people. The process of business is generated by several functions such as marketing, sales, procurement, operations, human resources and so on. Every function is broken up into activities and coordinating these activities into a sequence is what drives the result of that function.

Employing people to run systems in your business before employing them to perform a function is a key success factor for many reasons. This is emphasised given the staffing headwinds facing many local entrepreneurs, such as a disruptive labour force and low levels of skills in the market place. Building a business dependent on systems first makes for a better entrepreneurial bet than building one dependant on people first. It increases your agility, dramatically allowing you to source, select and train people more effectively.

Automate what can be automated, including information. The process of assessing and organising activities that drive the functions of a business also lends itself to new opportunities. In some cases, these activities can be contained in automated processes. This process of automation includes machinery and equipment, software systems that take care of a business process and the like. Whilst the upfront investment is high, the long-term gains of well-made choices in this regard are very rewarding. Automated systems can be programmed for change. People take a lot longer.

In a fast changing world, access to useful information across the organisation is vital. Dealing with issues before they arise and spotting opportunities before competitors enable a business to move ahead with pace. With cloud computing and increasingly smart, very low cost technologies, a business owner can share information across the organisation like never before, allowing all staff to contribute insights into opportunities like never before.

Outsource non-core people-heavy activities. Whilst looking at the activities in your business, an assessment of what is core to your business and what is non-core lends itself to ongoing strategic action. In cases where you have non-core activities involved in your business that rely too heavily on people, outsource them to a service provider instead. The service provider is likely to be a specialist in this non-core field of yours and might do a better job, introduce innovation and have the right type of staff well trained in the activity giving you a better result. Did Allan really need to have an entire department producing the circuits or could this have been outsourced?

Deepen customer relations. In streamlining your business through the activities above, time will become available. Focused and purposeful staff operating the systems that drive your business, all with measureable outputs that have incentives and consequences attached, leaves you to focus on the most important activity in your business, deepening customer relations. If this takes the form of sourcing and supplying new and additional products or services to deepen the relationship, all the better. Being in the face of your customer allows you to make good choices in how you deal with them and communicate. When times are tough, your customer’s view of your business and your service is all that counts.

The first time I met Allan two years back, his favourite mantra was ‘If it ain’t broke, don’t fix it’. Constantly thinking how to innovate your business is a key success factor in being entrepreneurial and leading your industry – because if you don’t your competitor certainly will. It took a crisis that nearly cost Allan his business for him to build agility into his operations.

The results have been pleasing; 38% profit growth off his highest profit before the crisis in the midst of an ongoing recession.

Pavlo Phitidis is the CEO of Aurik Business Incubator, an organisation that works with entrepreneurs to build their businesses into valuable assets. Pavlo is a regular commentator on entrepreneurship on 702 Talk Radio and 567 Cape Talk Radio. He can be contacted at www.aurik.co.za

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